Sustainable or green financing refers to investments made in sustainable development projects catering to a healthier and safer environment.
Projects and initiatives such as renewable energy, biodiversity sustainability and conservation, pollution control and prevention and many more fall under this segment.
Government funding towards green financing has seen a drastic fall since the pandemic struck as funds have been directed towards emergency relief measures and policies. However, there is reason to believe that a green recovery is the way forward for all pandemic hit nations.
The World Economic Forum has suggested that transitions to green financing and recovery strategies in the long run can create business opportunities that might be worth $10 trillion and roughly 395 million jobs can be created by 2030 worldwide.
A study has also suggested that for every $1 million spending on energy efficiency and renewable energy infrastructure can generate around 7 full time jobs in each segment compared to the 2 full time jobs generated in fossil fuels.
Green bonds are the most popular source of raising funds. They are fixed income instruments issued by organisations to raise funds for climate friendly projects and initiatives. Green bonds were solely representing 2% of the total bond market in 2020.
According to the World Economic Forum by 2023 the green bond market could be valued at $2.36 trillion. The biggest issuers of such bonds is the United States, followed by China and France.
The green bond market has been soaring even after the pandemic struck. In the first quarter of 2021 sustainable financing bonds reached $287 billion and green bonds hit an all time high of $131 billion.
The World Bank group in June 2021 announced their support to developing economies in order to enhance sustainability through green financing so as to achieve the Paris Agreement goals. About $83 billion will be advanced over a period of 5 years.
“We will be delivering climate finance at record levels and seeking solutions that achieve the most impact,” President David Malpass, said.